New Perspective

A perspective on the measurement of inflation credibility

J Rossouw, F Joubert
South African Journal of Economic and Management Sciences | Vol 8, No 4 | a1179 | DOI: https://doi.org/10.4102/sajems.v8i4.1179 | © 2014 J Rossouw, F Joubert | This work is licensed under CC Attribution 4.0
Submitted: 24 July 2014 | Published: 25 July 2014

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J Rossouw, University of the Witwatersrand, South Africa
F Joubert, University of Pretoria

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Abstract

Inflation targeting anchors inflation expectations, which are not within the sphere of control of the authorities, but can only be influenced over time by consistent policy.  As public distrust of inflation figures will feed through to inflation expectations, this paper highlights a comparison of the credibility of two different measures of inflation in terms of an inflation credibility barometer.  In a comparison of the barometer results to the analysis of inflation perceptions reported by other central banks, it is concluded that the barometer delivers superior results.  The main recommendation is that respondents should be requested in a follow-up study to indicate whether they attach a higher degree of credibility to the overall inflation rate or the rate used for targeting purposes.

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1. The application of the percentage change calculation in the context of inflation in Mathematical Literacy
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